Investor Presentation December 2014

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Transcription:

Investor Presentation December 2014

Disclaimer FORWARD LOOKING STATEMENTS The statements contained in this presentation include statements concerning our expectations, beliefs, plans, objectives, goals, strategies, future events or performance and underlying assumptions and other statements that are not historical facts. These statements are forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those expressed or implied by these statements. You can generally identify our forward-looking statements by the words anticipate, believe, continue, could, estimate, expect, forecast, goal, intend, may, objective, plan, potential, predict, projection, should, will or other similar words. LGI Homes, Inc. (LGI Homes) has based its forward-looking statements on its management s beliefs and assumptions based on information available to its management at the time the statements are made. LGI Homes cautions you that assumptions, beliefs, expectations, intentions and projections about future events may and often do vary materially from actual results. Therefore, LGI Homes cannot assure you that actual results will not differ materially from those expressed or implied by its forward-looking statements. Please read LGI Homes most recent Annual Report on Form 10-K, Quarterly Reports on Form 10-Q filed thereafter and other filings with the Securities and Exchange Commission for a discussion of some of the factors that could cause actual results to differ materially from those expressed or implied in forward-looking statements. You should not place undue reliance on forward-looking statements. Each forward-looking statement speaks only as of the date of the particular statement. LGI Homes expressly disclaims any intent, obligation or undertaking to update or revise any forward-looking statements to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statements are based. This presentation has been prepared by LGI Homes and includes market data and other statistical information from sources believed by LGI Homes to be reliable, including independent industry publications, government publications or other published independent sources. Some data is also based on LGI Homes good faith estimates, which are derived from its review of internal sources as well as the independent sources described above. Although LGI Homes believes these sources are reliable, it has not independently verified the information and cannot guarantee its accuracy and completeness. This presentation contains certain non-gaap financial information. A reconciliation of the non-gaap financial information to the GAAP financial measure that management believes to be most directly comparable is included in the Appendix at the end of this presentation. 2

Today s Presenters Eric Lipar Chairman and Chief Executive Officer Co-founder of LGI Homes who has led the land acquisition, development and sale of over 8,000 homes since the company s inception Has been in residential land development business since the mid- 1990s Currently serves on Residential Neighborhood Development Council for the Urban Land Institute Charles Merdian, CPA Chief Financial Officer CFO since June 2010 and Controller from 2004 through 2010 Certified Public Accountant with 15 years of experience in residential real estate and homebuilding finance Previously with The Woodlands Operating Company, Williamson- Dickie Manufacturing Co. and Coopers & Lybrand L.L.P 3

One of the Nation s Fastest Growing Homebuilders Founded in 2003, LGI Homes (NASDAQ: LGIH) has delivered over 8,000 homes Attractive Markets with Favorable Growth Characteristics Focus on entry level homebuyers Profitable every year since inception Never taken an inventory impairment Proven ability to expand into new markets Focused on growth: 34 active communities in 11 markets across 7 states 55% increase YoY in active communities Own and control ~22,000 lots ~98% increase YoY in owned and controlled lots Holdings by Division: Owned and Controlled Lots as of September 30, 2014 Florida 1,854 9% Southeast 2,253 10% LTM revenue of $352 million and closings of 2,200 homes 36% increase YoY in quarterly home sales revenues 24% increase YoY in quarterly home closings Note: Growth metrics calculated using 9/30/13 pro forma figures, adjusted for LGI/GTIS Joint Ventures not consolidated prior to the IPO Source: Company SEC filings as of 9/30/14 Southwest 4,228 20% Texas 13,303 61% 4

LGI Homes Closings Superior Growth Average Annual Home Closings 2010 2014 YTD FY 2010 Q3 14 LTM CAGR 2,200 2,209 2,000 1,800 1,600 1,400 1,617 LGIH: 54% 1,200 1,000 1,062 800 600 400 439 627 Mid cap: 10% Large cap: 10% Small cap: 9% 200 0 2010 2011 2012 2013 LTM 9/30/14 Note: Small cap peers include MHO, BZH, HOV, and WLH; Mid cap peers include MTH, SPF, RYL, KBH, and MDC; Large cap peers include TOL, DHI, LEN, NVR, PHM, and TMHC; Excludes CCS and WCIC due to lack of sufficient public disclosure to calculate the metric; LGI home closings calculated using pro forma figures, adjusted for LGI/GTIS Joint Ventures not consolidated prior to the IPO Source: SNL Financial 5

While Maintaining Industry Leading Financial Performance 5.5 MRQ Absorption (deliveries/ community/ month) 1 4.0 3.1 3.0 3.0 2.6 2.6 2.5 2.5 2.5 2.3 2.2 2.2 2.2 2.2 2.1 1.9 1.6 + BZH LEN WLH KBH PHM TMHC MTH DHI HOV SPF MHO MDC NVR CCS RYL TOL WCIC 27% 26% 26% 25% 23% 23% 22% 22% 21% 20% 20% 20% 20% 19% 19% 18% 17% 17% MRQ homebuilder gross margin + WCIC SPF LEN PHM TOL RYL CCS MHO DHI MTH TMHC WLH NVR KBH HOV BZH MDC Source: Most recent public homebuilder peer SEC filings 1 Based on reported active communities, may not be comparable 6

Unique and Proven Operating Model We have demonstrated the ability to profitably take our model to new markets. 7

Differentiated Sales & Marketing Approach Unique & highly successful marketing system proven to convert renters into new homeowners Weekly distribution of approximately 300,000 direct mailings to renters within a 25-mile radius of our active communities Minimal reliance on realtors 3-5 Sales Representatives and one Sales Manager at each office Open 360 days a year 8:30am - 8:00pm Onsite independent mortgage brokers assist customers with financing Move-in ready inventory 8

Commitment to Effective Training Comprehensive 100-day introductory training program 30 days of in-depth, in-house education about our time-proven selling strategies 70 days of hands-on training Weekly national sales call and training sessions held in each sales office Monthly regional training events for sales and construction Overview of 100 Day Training Process Quarterly corporate training events for sales managers, construction managers and the executive team Annual company-wide conference that leverages best practices across the organization 9

NVR HOV MHO RYL PHM MTH DHI MDC TMHC BZH WCIC LEN KBH SPF WLH TOL Superior Construction Process Resulting in High Inventory Turnover Shorter and consistent build times By eliminating model homes and customized options, we simplify our construction and purchasing processes, enabling us to achieve consistent and shorter build times High inventory turnover 1.5x LTM as of 09/30/14, significantly higher than the 1.1x average of our public homebuilder peers 3.7 Inventory Turnover (MRQ) 1 Average: 1.1x Median: 0.9x 1.5 1.3 1.2 1.1 1.0 1.0 0.9 0.9 0.8 0.8 0.8 0.8 0.7 0.6 0.6 0.5 Note: NVR is not drawn to scale Source: Public homebuilder peer SEC filings; calculated as LTM cost of sales / average owned inventory 1 Excludes CCS due to lack of sufficient public disclosure to calculate the metric 10

Flexible & Value-Oriented Land Acquisition Strategy We pursue a flexible land acquisition strategy of purchasing or optioning finished lots, at attractive prices, or purchasing raw land for residential development Demonstrable expertise in converting raw land into residential communities given our history as a successful land developer We target land that is away from city centers, but still close to major thoroughfares, retail districts and centers of business Less competition when acquiring land leads to more attractive cost basis Allows us to provide our potential homebuyers with homes at more affordable prices in locations with access to retail and employment centers Prior to land acquisition, we employ a comprehensive test marketing strategy to ensure consumer demand meets our requirements Ability to adapt to changing market conditions We leverage our land development expertise where finished lots are scarce or expensive 11

Multiple Avenues for Continued Growth Organic growth Product expansion Corporate acquisitions Expansion in existing markets Favorable demographic and economic trends Value oriented land acquisitions with proximity to major thoroughfares, retail and business centers Selectively expand into new markets Target markets with favorable supply and demand dynamics Markets with large and growing rental populations Increase product offerings with home deliveries at various price points to cater to local demand Customize sales and marketing efforts and allow expansion of target buyer group Ability to add scale through the acquisition of appropriately positioned homebuilders Immediate growth opportunity Acquired builder adopts LGI's proven operating model and shares best practices 12

Expanding into Higher Price Points in Existing Markets to Capitalize on Demand Great Lakes series 13

3Q 2014 Earnings Highlights LGI Homes continues to deliver on growth Closings 24% increase YoY in quarterly home closings 53% increase YoY in YTD closings Active selling communities 34 active communities in 11 markets across 7 states 55% increase YoY in active communities Owned and controlled lots ~98% increase YoY Home sales revenue 36% increase YoY in quarterly home sales revenue 68% increase YoY in YTD home sales revenue Average sales price Reached new high at ~$166,000 for the quarter 9% increase YoY in quarterly average sales price Attractive and consistent adjusted gross margins 27.9% YTD 14 compared to 27.9% YTD 13 Note: Growth metrics calculated using 9/30/13 pro forma figures, adjusted for LGI/GTIS Joint Ventures not consolidated prior to the IPO Source: Company SEC filings as of 9/30/14 15

Significant Operating Momentum Closings Active Selling Communities Average Sales Price ($000s) 1,112 1,704 22 34 $161 $152 $166 448 557 $147 YTD '13 YTD '14 3Q'13 3Q'14 Closings per Community per month: 3Q '13 3Q '14 6.9 5.5 YTD '13 YTD '14 3Q'13 3Q'14 Total Revenue ($ millions) Adjusted Gross Margin ($ millions) Adjusted EBITDA ($ millions) $275 $77 $35 $164 $68 $93 $46 $19 $26 $20 $8 $11 YTD '13 YTD '14 3Q'13 3Q'14 YTD '13 YTD '14 3Q'13 3Q'14 Adjusted Gross Margin % 1 : 27.9% 27.9% 27.5% 28.3% Adjusted EBITDA Margin % 1 : YTD '13 YTD '14 3Q'13 3Q'14 12.5% 12.7% 12.1% 11.9% Note: All 2013 metrics are pro forma figures, adjusted for the LGI/GTIS Joint Ventures not consolidated prior to the IPO; see appendix for a reconciliation of non-gaap measures 1 Calculated as a percentage of home sales revenues 16

2014 Trends 119 156 210 Closings 243 228 191 174 183 200 241 165 Active Selling Communities 37 38 33 34 29 30 31 34 28 27 27 4.4 Average Closings per Community 5.8 7.5 6.6 7.6 7.8 5.3 5.4 5.9 6.5 4.3 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Total Revenue ($ millions) Adjusted Gross Margin % 1 Average Sales Price ($ in 000s) $106 $93 28.3% $166 $76 27.9% $161 27.5% $157 Q1 Q2 Q3 Q1 Q2 Q3 EBITDA Margin % 1 : Q1 Q2 Q3 12.7% 13.1% 14.2% 14.4% See appendix for a reconciliation of non-gaap measures 1 Calculated as a percentage of home sales revenues 17

Growth-Oriented Capital Structure The Company has significant liquidity to opportunistically fund its growth initiatives. Pro Forma Capitalization ($ millions) Pro forma net debt to net book capitalization of ~44% and total debt to total book capitalization of ~59% as of Sept 30, 2014 1 Pro forma cash of $113mm 1 $175mm revolving credit facility recently upsized to $200mm Convertible As of notes offering Pro ($ in millions) 9/30/2014 adjustment forma Cash and cash equivalents $46 $65 2 $113 $200mm senior secured credit facility maturing 2017 3 $160 $160 New convertible notes due 2019 4-85 85 Total debt $160 85 $245 Total book equity 1 $186 (17) $169 Total book capitalization $347 $415 Credit statistics LTM Adjusted EBITDA 5 $43 $43 Inventory + cash $338 $65 $403 Total debt / Total book capitalization 46% 59% Net debt / Net book capitalization 38% 44% Total debt / LTM Adjusted EBITDA 3.7x 5.7x Net debt / LTM Adjusted EBITDA 2.7x 3.1x Inventory + cash / Total debt 2.1x 1.6x 1 These metrics give effect to the use of $16.5 million of the net proceeds of the recent convertible notes offering to repurchase shares of our common stock from some of the purchasers of the convertible notes 2 Reflects net proceeds of the recent convertible notes offering, net of offering costs, selling discounts and repurchased shares 3 Outstanding borrowings mature depending on asset category through 2017 4 Aggregate principal amount does not reflect bifurcation related to GAAP accounting 5 See appendix for reconciliation of Adjusted EBITDA, a non-gaap financial measure 18

Adjusted Gross Margin Reconciliation ($ in thousands) 3 months ended 9 months ended September 30, 2013 September 30, 2014 September 30, 2013 September 30, 2014 Home sales revenue $67,997 $92,516 $163,966 $274,848 Cost of home sales 49,429 67,256 118,856 201,661 Gross margin $18,568 $25,260 $45,110 $73,187 Capitalized interest charged to cost of sales 114 473 700 1,147 Purchase accounting adjustment 1-434 - 2,448 Adjusted gross margin $18,682 $26,167 $45,810 $76,782 Gross margin% 2 27.3% 27.3% 27.5% 26.6% Adjusted gross margin % 2 27.5% 28.3% 27.9% 27.9% Note: All 2013 metrics are pro forma figures, adjusted for the LGI/GTIS Joint Ventures not consolidated prior to the IPO 1 Adjustment results from the application of purchase accounting in connection with the GTIS Acquisition and represents the amount of the fair value step-up adjustment to real estate inventory and lot option contracts sold during the three and nine months ended 9/30/14 2 Calculated as a percentage of home sales revenue 20

Adjusted EBITDA Margin Reconciliation ($ in thousands) 3 months ended 9 months ended LTM September 30, 2013 September 30, 2014 September 30, 2013 September 30, 2014 September 30, 2014 Net income $7,787 $7,046 $19,010 $20,677 $23,330 Interest expense 41-47 - 4 Income taxes 209 3,488 440 10,828 11,648 Depreciation and amortization 1 129 171 384 471 660 Capitalized interest charges to cost of sales 114 473 700 1,147 1,551 Purchase accounting adjustment - 434-2,448 6,221 Other income, net (49) (628) (98) (663) (663) Adjusted EBITDA $8,231 $10,984 $20,483 $34,908 $42,751 Adjusted EBITDA margin % 2 12.1% 11.9% 12.5% 12.7% 13.1% Note: All 2013 metrics present and LTM 14 metrics include pro forma figures, adjusted for the LGI/GTIS Joint Ventures not consolidated prior to the IPO 1 Depreciation and amortization expenses includes amortization related to the marketing intangible asset 2 Calculated as a percentage of home sales revenue 21

Adjusted Gross Margin Reconciliation 3 months ended ($ in thousands) March 31, 2014 June 30, 2014 Home sales revenue $75,919 $106,412 Cost of home sales 56,389 $78,016 Gross margin $19,530 $28,396 Capitalized interest charged to cost of sales 277 396 Purchase accounting adjustment 1 1,091 923 Adjusted gross margin $20,898 $29,715 Gross margin % 2 25.7% 26.7% Adjusted gross margin % 2 27.5% 27.9% 1 Adjustment results from the application of purchase accounting in connection with the GTIS Acquisition and represents the amount of the fair value step-up adjustment to real estate inventory and lot option contracts sold during the three months ended 3/31/14 and 6/30/14 2 Calculated as a percentage of home sales revenue 22

LGI Homes Investor Relations 1450 Lake Robbins Drive, Suite 430 The Woodlands, TX 77380 (281) 210-2619 InvestorRelations@LGIHomes.com